Option Investor
New Plays
Click here to email James
HAVING TROUBLE PRINTING?
Printer friendly version
New Plays
Long Plays
Short Plays
KO None
MSFT  
MTH  
NDN  

Play Editor's Note: I don't want to overstate the obvious but the major indices are still in a bear market and the trend is still lower. The DJIA and the S&P 500 have still not broken through their four-month trendline of resistance. However, it does look like the major indices have produced a significant market bottom. At this particular moment I would be more inclined to search for short-term bullish trades but in the back of my mind this is just a bear-market rally that may have potential for more, maybe not. The recent actions by the Federal Reserve have thrown a new spin on things that has yet to be completely digested by market forces.


New Long Plays

Coca-Cola - KO - close: 61.04 chg: +1.08 stop: 57.99

Company Description:
The Coca-Cola Company is the world's largest beverage company. Along with Coca-Cola, recognized as the world's most valuable brand, the Company markets four of the world's top five nonalcoholic sparkling brands, including Diet Coke, Fanta and Sprite, and a wide range of other beverages, including diet and light beverages, waters, juices and juice drinks, teas, coffees, energy and sports drinks. (source: company press release or website)

Why We Like It:
Dow-component KO has been showing a lot of relative strength last week. Shares have broken through the top of its recent trading range and did so on above average volume, which is bullish. Traders could probably buy KO right here. However, after a four-day rally, we would rather buy a dip. We're suggesting readers buy KO in the $60.05-59.50 range. We'll suggest a stop loss at $57.99. Our target is the $64.50-65.00 range. The Point & Figure chart is bullish with a $90 target.

Picked on March xx at $xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 04/17/08 (unconfirmed)
Average Daily Volume: 10.9 million

---

Microsoft - MSFT - close: 29.18 chg: +0.56 stop: 27.19

Company Description:
Founded in 1975, Microsoft is the worldwide leader in software, services and solutions that help people and businesses realize their full potential. (source: company press release or website)

Why We Like It:
It looks like MSFT may have finally built a decent bottom over the last six or seven weeks. Traders are buying the dips again and the path of least resistance appears to have changed to up. The potential YHOO-MSFT merger is still a cloud over the stock. However, if it falls apart, then shares of MSFT probably go up. If the deal gets done then shares of MSFT probably go up, as long as they don't raise their bid too much. We are suggesting new long positions right here but readers could choose to wait for a move over $29.60 or look for another dip near $28.50. Our suggested stop loss is at $27.19. If you want to be more aggressive put your stop under $27.00 and more conservative traders could try putting your stop around $28.25 but that maybe too close. There is potential resistance with some significant moving averages overhead. However, we are aiming for the $32.00-33.00 zone.

Picked on March 23 at $29.18
Change since picked: + 0.00
Earnings Date 04/24/08 (unconfirmed)
Average Daily Volume: 114 million

---

Meritage Homes - MTH - close: 18.04 chg: +2.08 stop: 15.90

Company Description:
Meritage Homes Corporation builds primarily single-family homes across the southern and western United States under the Meritage, Monterey and Legacy brands. (source: company press release or website)

Why We Like It:
This play is for the more aggressive trader. By their own account the homebuilders believe that they still face a very tough 2008 season. Many builders claim they don't see when things will improve. However, all of the recent actions by the Federal Reserve and some of the changes in the recent stimulus package have done a lot to improve the real estate market and more importantly begin to lift investor and consumer sentiment about real estate. The homebuilder stocks were big winners last week as they are a heavily shorted group. If there is any follow through to the rally the shorts could get crushed again. MTH is a great short-squeeze candidate. The most recent data lists short interest at more than 40% of the 22 million-share float. That is exceptionally high short interest and a very small float. This equates to about 13 days worth of short interest. On a technical note MTH's recent rally has been fed by rising volume, which is bullish. Thursday's rally broke through the 200-dma. Plus, the stock is poised to breakout past significant resistance (see chart). We consider this an aggressive play because the stock is already up a lot in recent days and we have to use a wide stop loss. We are listing two entry points. We are suggesting readers buy MTH if the stock trades at $18.60 or if it pulls back to $16.75. At either entry we would use a stop loss at $15.90. The $20 level might offer some round-number resistance but our target is the $25.00-27.00 zone. The P&F chart is bullish with a $28 target. FYI: MTH is due to present at an analyst conference on March 26th.

Picked on March xx at $xx.xx <-- see TRIGGERs
Change since picked: + 0.00
Earnings Date 04/24/08 (unconfirmed)
Average Daily Volume: 893 thousand

---

99 Cents Only Stores - NDN - cls: 10.76 chg: +1.08 stop: 9.49

Company Description:
99 Only Stores is the nation's oldest existing one-price retailer. 99 Only Stores is celebrating over 25 years of selling Everything, Everyday for 99 only in its 263 clean, attractively merchandised stores located in California, Texas, Arizona and Nevada. (source: company press release or website)

Why We Like It:
NDN appears to be breaking out from both its long-term bearish trend and its recent sideways trading range. Thursday's rally also pushed NDN through technical resistance at its 200-dma. Another bullish signal was the above average volume on the move and the new MACD buy signal. However, instead of chasing NDN right here we are suggesting readers wait for a dip. We are suggesting readers buy NDN in the $10.30-10.00 zone. We'll set the stop at $9.49 (more conservative traders could try one closer to $10.00 but that might be too tight). Our target is the $11.95-12.00 range.

Picked on March xx at $xx.xx <-- see TRIGGER
Change since picked: + 0.00
Earnings Date 05/12/08 (unconfirmed)
Average Daily Volume: 2.0 million
 

New Short Plays

None today.
 

Premier Investor New Play Archives